Student Defaults on Loans Drop Off in Arkansas

"The percentage of people in Arkansas who did not make payments on their federal student loans within three years of graduating has dropped from 2013 to 2014, according to newly released data from the U.S. Department of Education," Arkansas Online reports.

"That percentage, known as the default rate, measures those who didn't make the payments in that period against the total number of student-loan borrowers who started repayment. Arkansas had 43,606 borrowers who started repayments Oct. 1, 2012, and 6,105 -- or 14 percent -- had defaulted. In 2014, 5,187 -- or 12.2 percent -- of a total 42,360 borrowers were in default.

At the same time, the nation's rate increased for the first time in five years by 2 percentage points: 580,671 of more than 5 million borrowers -- or 11.5 percent -- were in default in 2014, compared with the 11.3 percent -- 593,182 of more than 5.2 million borrowers -- in default the previous year. The department does not say how much money is attached to the defaulters. ...

Community colleges are prime examples of borrowers who are the typical defaulters, said Karen McCarthy, director of policy analysis at the National Association of Student Financial Aid Administrators.

'A large body of research shows that most of the students who go into default don't finish programs,' she said. 'They're the ones who go to school, start borrowing money, and then they don't finish. Then they don't end up getting the employment that's supposed to help them pay back the loan.'

Community colleges, she said, tend to have lower completion rates than four-year universities. And two-year schools are generally cheaper to attend, but students there are still seeing the maximum annual loan limits for which they are eligible, she said. The schools cannot set lower limits for the loans.

Some schools have really embraced loan counseling and are encouraging Congress to allow for more flexibility in that realm. Students are required now to take entrance and exit counseling when borrowing for the first time.

By far, the most effective initiatives to reduce default rates has been retention efforts, those that help people stay enrolled and finish a degree, she said.

The group has been advocating for changes to the federal Higher Education Act, which is set to be reauthorized since it expired in 2013. The changes range from the counseling flexibility to limiting maximum loan amounts.

'We hold schools accountable for default rates but don't give them enough control over the student-loan borrowing,' McCarthy said."

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